MNI NBH Preview - September 2024: Easing Cycle Resumes
Executive summary:
- The National Bank of Hungary is expected to resume its easing cycle with a 25bp cut to the base rate, taking it to 6.50%, following a pause in August.
- Since the previous meeting, the Fed has begun its easing cycle with a bold 50bp cut while the latest domestic inflation data has come in below expectations, offering NBH officials greater room for manoeuvre.
- The Council is likely to stick to a relatively cautious tone, but could signal the possibility of another rate cut before year-end.
See the full preview, with a summary of sell-side analyst views, here:
Last month, the NBH kept its base rate unchanged at 6.75%, in what was seen to be a brief pause in the easing cycle. The policy statement pointed to the surprise increase in headline inflation in July, while forward guidance was familiar and generally hawkish. Deputy Governor Virag said expectations of 1-2 more cuts by year-end remain realistic (with the base rate in the 6.00-6.25% range at year-end), guidance consistent with pre-decision speculation that rate cuts would resume this month followed by one more rate cut before year-end – potentially in December – when updated inflation forecasts will be provided.
Since then, Hungary’s consumer prices rose +3.4% Y/Y (Est: +3.6%) in August, a sharp drop compared to the +4.1% recorded in July.The large decline was mainly due to large and favourable base effects in fuel inflation, putting the headline figure back within the central bank’s +3.0% +/- 1pp target range following last month's upside surprise.The further moderation was also partly due to the stagnation price growth on a monthly basis as CPI came in flat month-on-month in August.